Macro Minute: Dr. Copper Crashing is Bad Signal for the Global Economy
The Implications of China's Slowing Economy, Copper Stockpiles and Global Market Trends
Back in April, the copper stockpiles in China were brought to my attention by Andreas Steno on X. While Andreas implied this was part of a larger plan by the CCP, my initial reaction, as you can see, was to question domestic consumption.
Why is domestic consumption of copper an important variable? Because, we know China's economy is in big trouble and copper is a primary material for many of the products they produce from electric vehicles to electronics. If my predictions about China are correct and their economy were in brutal pain, we'd expect to see the stockpiles grow. Also, China is a quota-driven command economy. Importers really don't have the authority to adapt to this shrinking demand very quickly.
Well, it turns out my initial reaction was correct. This was not some well-orchestrated plan by the clever communists to stockpile a critical commodity, it was a result of their mismanagement and economic decline.
China is now exporting record amounts of copper, which could lead to a drastic decline in price. In addition to the China hoarding FUD, the largest copper miner in the world has had issues. "Codelco posted production of 1.325 million metric tons for the year - its lowest level in a quarter century - according to the filing, compared to 1.446 million tons in 2022." - Reuters
This decrease in production from state-owned Codelco might have something to do with Chile's election of hard-left socialist President Boric in Dec 2021.
I was surprised by the recent spike, but still be be proved correct as copper continues to decline. Global economic activity is definitely decreasing, and copper demand along with it. China is now selling copper, and mining will likely recover from last year's 25 year lows. All this leads to the likely possibility of a crash in the price of copper.
Crashing copper is yet another sign of the coming recession. If the economy were strong and thriving, copper demand would be up not down. That's why he's called Dr. Copper, because he has a Ph.D. in Economics, with the ability to predict turning points in the global economy.
Hold strong and have a great day,
Ansel
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